Naira slips to N1,855/£ as Dangote's dollar sales add pressure
The Nigerian naira weakened against a resurgent British pound, highlighting a collision between global rate-hike expectations and emerging domestic dollar demand from the Dangote refinery.
The Nigerian naira depreciated against the British pound across both the official and parallel markets on Wednesday. On the Nigerian Foreign Exchange Market, the currency opened at N1,855/£1, edging down from N1,849/£1 in the previous session. The official pound rate has oscillated within a tight N1,825 to N1,890 band, while the naira sat between N1,375 and N1,380 against the US dollar.
Sterling’s strength stems from shifting monetary policy expectations. With UK CPI remaining stubbornly above 3% due to persistent energy and service price pressures, markets are now pricing in two Bank of England rate hikes in 2026, including one in September. The pound held near 1.34 against the dollar, supported by a steady benchmark rate of 3.75%, UK growth of around 1.0% to 1.2%, and underlying yield support that largely offset any political turbulence from Prime Minister Keir Starmer's early 2026 resignation.
Local structural risks emerge
While the Central Bank of Nigeria has used frequent interventions to support the naira under its managed float, a new domestic headwind is forming. Dangote Petroleum Refinery has begun selling to local retailers in US dollars after encountering issues with its naira-for-crude supply agreements. This shift is expected to generate significant commercial demand for dollars, creating longer-term downward pressure on the naira's purchasing power.
The central bank retains some ammunition, with foreign exchange reserves trending above $51 billion. Furthermore, the IMF recently noted that the naira remains technically undervalued by 25.6%, even as it appreciates against the greenback.
Geopolitics complicate rate outlooks
The broader FX environment is being shaped by contrasting inflation data and geopolitical risk. A soft US CPI reading of 3.5% year-on-year in June—down from a 4.2% peak in May and below the 3.8% consensus—initially weakened the greenback. However, safe-haven flows are capping those losses as tensions escalate between the US and Iran over the Strait of Hormuz. Surging oil prices have sparked renewed inflation concerns, prompting traders to assign a roughly 50% probability to a Federal Reserve rate hike in September.
